State Economic Impacts of the University of Connecticut Prepared by: Rigoberto A. Lopez, Mahdi Fallahi, and Steven Lanza Department of Agricultural and Resource Economics Department of Economics University of Connecticut Fall 2019 ECONOMIC IMPACTS OF THE UNIVERSITY OF CONNECTICUT EXECUTIVE SUMMARY This report ascertains and documents the significance of the University of Connecticut (UConn) to the State of Connecticut’s economy.1 Because UConn purchases goods and services from other industry sectors and hires local labor, its economic impacts cascade throughout the entire state economy. This study uses FY 2018 data on University operational and capital expenditures, employment, and labor income for the main and regional campuses (Storrs, Greater Hartford, Stamford, Avery Point and Waterbury) as well as UConn Health. It estimates the total economic impacts of the University as a whole and of each campus through the use of the IMPLAN input- output model, which channels UConn spending into statewide impacts on output, employment, labor income, and value added to the state economy. The analysis reveals that UConn’s FY 2018 total impact on the state’s economy was significant, as summarized by the following: • $5.3 billion impact on statewide economic output, generated directly from UConn and through spillover effects on other industries and households. • 26,000 jobs supported through $2.6 billion in labor income that accrues not just directly from UConn but also from business-to-business and household spending. • $2.8 billion in value added to the state economy—the best measure of UConn’s contribution to gross state product—given by the difference between the value of output and the cost of raw materials (i.e., money left in the hands of residents and businesses). 1 This study was conducted by Rigoberto A. Lopez and Mahdi Fallahi of the Department of Agricultural and Resource Economics, and Steven Lanza of the Department of Economics, at the request of the Office of Budget and Planning. The authors have no financial interest in, or benefit from, the application of this research. The views expressed herein are the authors’ and do not represent the policies or views of the sponsoring organization. Errata are the sole responsibility of the authors. i • For every dollar spent by UConn, 77 cents were generated elsewhere in the state economy. Moreover, the statewide output traced to UConn amounted to approximately $1,500 per Connecticut resident. The economic impacts of each UConn campus and UConn Health are summarized as follows: • The Storrs campus contributed $2.7 billion to state output, over 13,000 jobs, $1.2 billion in labor compensation, and $1.4 billion in value added to the economy, making it the lead campus in terms of total impacts. • UConn Health contributed $2.2 billion to state output, over 10,000 jobs, $1.2 billion in labor income, and $1.2 billion in value added—a close second to Storrs in terms of impacts. • Regional campuses (Greater Hartford, Stamford, Avery Point and Waterbury) contributed $383 million in statewide output, over 2,100 jobs, $187 million in labor income, and $224 million in value added. • Greater Hartford (including the downtown campus, School of Law and School of Social Work) accounted for 62% of the combined regional campuses’ output impact, followed by Stamford (19%), Avery Point (13%), and Waterbury (6%). UConn is an important engine of Connecticut’s economy, as the impacts of its teaching, research, clinical, and public service activities are felt throughout the state. Beyond the spending that creates measurable economic impacts, the teaching mission contributes to the economy by producing an educated workforce prepared for modern job requirements, and the research mission generates innovation and discovery that lead to business start-ups and new solutions to societal problems. The clinical mission helps sustain the health of the workforce, and the University’s public service activities directly assist state and local organizations improve their service offerings. Thus, the impacts in this report are conservative estimates of UConn’s overall economic impact in the state. ii ECONOMIC IMPACTS OF THE UNIVERSITY OF CONNECTICUT 1. INTRODUCTION Since its founding in 1881 as an agricultural school, UConn has contributed to the economic transformation of the state from an agricultural to a post-industrial economy. While fulfilling its mission of teaching, research, service and outreach, UConn has been a key economic driver of the state for nearly 140 years. UConn is leading the way into a knowledge-based economy with investments in research, education of the labor force, and performing arts—all of which increase the quality of life for state residents. Moreover, UConn regularly engages in strategic collaborative initiatives with leading businesses in the state, such as United Technologies and the Jackson Laboratory, which recognize the University’s critical role in generating innovation and economic activity. The spending of any large business or non-profit organization creates economic impacts that cascade throughout an economy just as a rock thrown into a pond creates concentric waves that ripple throughout the pond. As a large non-profit organization, UConn is the rock and its indirect and induced impacts are the ripples in the pond. These indirect and induced impacts derive from the University’s direct spending on employees and vendors, who then pay mortgages/rent, buy groceries, shop in retail stores, and hire employees. Without such direct spending, these dollars would not circulate throughout the state economy. The purpose of this study is to ascertain and document the significance of UConn to the State of Connecticut’s economy as measured by the chain of spending linked to UConn’s programs and activities. The University draws its revenues from state funding, student tuition and fees, external research grants, donations, hospital and health services, and proprietor’s income from various commercial activities. Expenditures include the hiring of local labor as well as the purchasing of goods and services from vendors in other sectors of the state economy. The economic impacts of these expenditures cascade throughout the entire economy. In addition, student spending beyond that which accrues to the University generates economic impacts.2 Finally, FY 2018 marked a robust period of capital spending for UConn, generating additional 2 This is off-campus spending by enrolled students for rent, clothes, food, and other living expenses. 1 impacts on the Connecticut economy. This capital spending accrues to contractors that hire local labor at prevailing wages to build buildings, laboratories, and other University facilities. Specifically, this study measures the economic contribution of UConn in terms of statewide output (sales or revenues), jobs, salaries and benefits, and the value added to the economy. While the study includes the operational and capital spending of the University as well as students’ non- university spending, it excludes the impact of visitors’ spending and the imputed value of volunteer work, making the estimate of overall economic impact a conservative one. In addition, we provide separate estimates of the impact of University research spending and of University contributions to state and local taxes, both of which are included in the aggregate estimates presented. 2. DATA AND METHODOLOGY Before discussing the details of the specific economic model used in this study, it is instructive to highlight the economic activities attributable to a flagship public university such as UConn, and how those activities affect the local and state economies. Following previous economic impact studies of public universities with a similar mission,3 these activities can be categorized as: 1. Academics: This mission provides instruction, which requires spending on faculty and staff salaries as well as facilities and equipment to deliver this portion of its mission. 2. Research: This mission conducts basic and applied research, not just in STEM fields, but also across disciplines, including the social sciences and humanities. 3. Community Engagement: UConn provides direct funding through community engagement and other activities, such as extension programs, performing arts events, education services to communities, and state policy advice and engagement. 4. Health Services: UConn Health has a dual role as a hospital/health center as well as an academic institution. Delivery of those services and the way they are funded, mostly through clinical fees, have a substantial impact on the state economy. 3 See Swenson (2019) on Penn State University, Economic & Planning System (2016) on the University of California-Davis, UMass Donahue Institute (2016) for the University of Massachusetts, and Umbach (2014) on UConn. 2 5. Administration: Expenditures on staff are required to support teaching, research, service and outreach programs, as well as administrative functions such as compliance, finance, planning, facility management, and human resources. 6. Student Spending: Although not part of the UConn budget, students spend money in their campus communities, which constitute an economic contribution attributable to the presence of UConn. This is non-university spending by enrolled students on off-campus housing, local restaurants, entertainment, and other outlays, excluding any payments to UConn for things such as tuition, dining halls, or on-campus housing. 7. Capital Spending: Expenditures on construction